WalkMe Ltd.

Good morning, and thank you for joining the WalkMe third quarter 2023 earnings call. I'm John Strepa, head of investor relations for WalkMe, and today I'm joined by Dan Adika, CEO and co-founder, Scott Little, chief revenue officer, and Hageet Yanan, our chief financial officer. Before we begin, a few housekeeping items. First, we are doing a new method of our earnings call this quarter, incorporating a video element to help showcase our technology and some of the great things we're achieving here at WalkMe. I encourage you to go to our IR website, ir.walkme.com, to watch live or replay, which will be available following the conclusion of our presentation. Second, for the Q&A portion of the call following our prepared remarks, if you would like to ask a question, please raise your hand in the application or press star 9 on your phone. We'll call on each person and unmute your line. At that time, you'll be prompted to unmute yourself either through the application or by pressing star 6 on your phone. Note, certain statements we make today may constitute forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events. These forward-looking statements are subject to risks, certainties, and assumptions, some of which are beyond our control. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our annual report on Form 20F filed with the Securities and Exchange Commission on March 14, 2023 and other documents filed with or furnished to the SEC. See our press release dated November 14, 2023 for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of our past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. Further, throughout this call, we provide a number of key performance indicators used by our management and often used by competitors in our industry. For more information on the non-GAAP financial measures and key performance indicators, including the reconciliation tables, see our press release dated November 14, 2023. And with that, I'd like to hand it off to Dan.

Thank you, John, and hi, everyone. I'd like to begin by addressing the current situation in Israel. On October 7th, the Hamas, a terrorist organization, launched a brutal attack against Israeli civilians that was unlike anything our generation have experienced and hopefully something future generations will never experience again. The tragedies we witnessed have left Israel in a constant state of grief. I want to extend our deepest condolences to the families who lost their loved ones in this brutal attack. We also pray for the safe and swift return of the men, women and children kidnapped in Gaza. But if there is anything we've learned over these last few weeks is that we're strong and we will prevail. I couldn't be more proud of our local and global teams who've been working tirelessly to ensure business continuity and the success of our customers, while coming together to support one another in the most unique way. Around 36 people of our workforce are currently in reserve, and we pray for their safe return. I've seen in the recent weeks the worst in humanity and the very best. I'm extremely proud of our entire staff. Thank you. Thank you for your passion, commitment through this very tough few weeks. Turning now to our quarterly results, we had a milestone quarter. A year ago, we set out on an important journey to be a profitable, sustainable growth company. And I'm glad to report that we have achieved profitability on a non-gap basis for the first time ever ahead of plan, generating $1.6 million in operating profit and continued to drive our free cash flow higher to over $6 million. On revenue, we grew our subscription revenue by 10% year-over-year to over $62 million. We've added 11 Dapp customers, reaching a new high of $194, and gained another over $1 million ARR customers, reaching our previous high of $39. We're profitable and we're generating cash. Q3 revenues met expectation as we continue to drive the right efficiencies and business processes needed to scale our business forward on the path to the Rule of 40. The strategic investment we've made over the past two years are paying off. We had another fantastic quarter generating new business in the public sector. Our partner ecosystem continues to gain momentum as we sell higher contribution to both new business and the delivery of DAP to our customers. In Q3, we launched our enterprise-grade partner program, Propel, offering existing and new partners the foundation to unlock enterprise-scale revenue streams through a self-serve, best-in-class knowledge platform. I'm very excited to share that Walkme has also been certified for the AWS marketplace, where now customers can leverage cloud provider annual commitment towards payment to Walkme. I believe this partnership will drive shorter sales cycles for existing deals and renewal reducing the friction and also have a huge potential to unlock new business for WalkMe as we invest in the relationship with the cloud providers. Our partners are a huge part of the company strategy and we will continue to invest to ensure our mutual success. Digital transformation spend is at an all-time high, according to a recent IDC report, surpassing $3.2 trillion, while BCG are reporting that 70% of transformation projects are not meeting their objectives. This paradox is resulting in more process, complexity, and lack of ROI. In an average organization, there are now almost 1,900 workflows and processes, choking productivity, agility, introducing risk and compliance issues. As we march towards the AI transformation age, the speed and the volume of change management are increasing exponentially. Everyone is using AI already. Early reports show a high percentage of employees use AI tools without their managers even knowing about it. Through WalkMe Discovery, we're seeing over 6,800 different AI applications in use in enterprises. Organizations want the benefit of generative AI, but they're heavily concerned about risk and security compliance that these tools bring. AI spend is set to reach $1.5 trillion by 2030, according to President's research. The questions on every CEO mind is not, should we adopt AI? It's how we do it safely and responsibly without hurting innovation. If transformation was dragging before, it's getting much more complex now. Putting in place a true digital adoption strategy will ensure enterprises can manage through the transformation required. It will align the management and the user expectation by unlocking data to business goals and technology adoption and taking immediate action on top of all of their customer-facing and internal systems to deliver the best experience. Dapp, now more than ever, is critical for organizations. In Q3, we saw two of our largest customers renew for an additional three-year period, signing multi-million dollar agreements. These renewals were a vote of confidence that the value achieved with WalkMe has high ROI and it's tied closely to the core of their business. Shifting to product, we continue to heavily develop our proprietary DeepUI technology for the past five years. It's an ML-based model that learns how users are engaging with all enterprise systems and workflows to do their jobs. It's the underlying technology behind our entire digital adoption platform. Our new data AI offering of WalkMe Discovery and User Interface Intelligence, UII, powered by our DPUI technology, have seen continued growth in Q3 of over 85% quarter over quarter in employee coverage, with Discovery surpassing 3.8 million employees' coverage, compared to 2 million in Q2 and new AI with 2.2 million compared to 1.3 million in Q2. This continues to be one of our fastest growing product offerings to date. The growth in demand is primarily due our new launch shadow AI capabilities as part of WalkMe discovery, unlocking full visibility into all the AI application in use by employee within an organization, and allowing the business to build the relevant strategy needed to guide the employees to the right and secure AI assets. This has been a game changer for our customers. We're also implementing a wide array of generative AI capabilities throughout our platform, offering our builders more content creation capabilities and offering the end user new AI capabilities in the flow of work. We've launched in beta our AI Answer product, allowing employees access to all the organizational knowledge at their fingertips. They can now tap into all company resources and leverage enterprise-grade secure generative AI to extract the relevant information they need to do their job. It's not just the search. Employees can also start action immediately and complete processes. Answer AI is a great addition to WalkMe to help drive employee productivity. We've also launched in beta our patent pending data validation capability, which understand in real time what data users are inserting into any enterprise application and make sure the data input is valid according to the company policy. Data hygiene for enterprise is a key component of becoming a data driven organization. This new product leverages generative AI in the flow of work in the most innovative way, ensuring data hygiene and compliance issues are solved. We will continue to develop and launch more contextual co-pilot capabilities to enhance employee productivity. I'm happy to share that we just concluded Realize, our annual digital adoption event, where we shared our vision for Dapp's critical role in helping companies drive AI adoption. We revealed our product roadmap and shared use cases and insights from customers like Cisco, Gap, ServiceNow, Veolia, TUI, and Nestle. We also highlighted best practices from our partners, including Deloitte and Tech Mahindra, among others. During the conference, we had the privilege of hosting one of our valued customers, a Fortune 100 technology company. They're leveraging WalkMe heavily to identify issues, make changes quickly, and streamline work processes. Their executives were concerned about the potential risk of inputting sensitive data into unsecured platform in reference to AI products. They leveraged WalkMe Discovery and Shadow AI to monitor all application use and redirect employees to the trusted applications. In just a few weeks, they were able to cut down their use of risky software by 30% and drove adoption to certified applications by 25%, successfully avoiding potential millions of dollars lost in compliance fines and loss of customer trust. Another Fortune 100 leader in consumer packages good joined us at Realize and gave us a great overview of how they're applying WalkMe on a global scale with over 280,000 employees. They faced a major challenge to enhance digital skills across their entire workforce and maintain a competitive advantage. They began the rollout of WalkMe on their HR platforms. Within six weeks, they achieved full compliance with security protocols, reduced errors, and boost productivity. Over the past year, this move saved them about 600,000 hours of employee productivity. With that, WalkMe has become a key part of their strategy. They've also leveraged WalkMe Discovery to address shadow AI application and direct employee to secure approved AI solutions. I'm glad to see that our leading customer leveraging our new AI product clients as part of their digital transformation strategy. It was a milestone quarter. Our relentless focus on operational excellence, strategic investments, and enterprise-grade products are paying off. I'm pleased with the team's execution as we were able to move to profitability and cash flow positive ahead of our plans. This is a testament to our strong unit economic and our ability to execute. In the upcoming quarter, we will focus on actions that will help us re-accelerate new business growth. With that, I will hand it over to Scott, our CRO, to share more about our achievements of Q3. Thank you.

Thanks, Dan. Our path to being a profitable, sustainable growth company is clearer than ever. We continued our momentum from Q2 and delivered a strong performance in our investment areas for 2023. Our U.S. federal team had a solid quarter, and we saw another large expansion in the Big Four GSI space. I'm particularly pleased that the majority of our six and seven figure deals this quarter included significant contributions from our field CTO business value engineering team. This team of seasoned business consulting experts helps our clients and partners analytically demonstrate the real value of digital adoption from both the cost savings and a top line expansion perspective. When the field CTO team is engaged, we see higher win rates and larger average deal sizes when compared to pursuits without their help. And it paves the path forward to delivering the true value of debt throughout the customer lifecycle. In Q3, we delivered both with our largest customers in the enterprise and through our Velocity Engine in the mid-market. We've grown our 1 million ARR customers to 39, and importantly, continue to grow our DAP customer footprint, which is now 194. Our DAP customers are the backbone of our install base. They are the pioneers, ensuring the success of their digital strategies by deploying WalkMe on top of critical business processes that typically span multiple applications and often span the entire enterprise tech stack. These clients expand their DAP deployments with us because they achieve real business value. And in the process, they expand the digital adoption ecosystem because they invest in DAP professionals who often go on to bring WalkMe to new deployments at new employers as their careers advance. This quarter, we had more examples of the commitment of our debt pioneers. Dan mentioned that two of our largest long-term customers committed to walk me once again for multi-year renewals. Now, this only happens because of the consistent value that we've been able to deliver. We also saw one of the largest expansions we've signed to date from our commercial mid-market team. This deal was amazing to see, as the expansion came just a few short months after initial signing. highlighting our improving timeframe for value realization with our customers. As always, I'm pleased to share some of our newest customers, such as Silver Fern Farms from our ANZ region and Pure Storage in the Americas region, as well as expanded relationships with Suncorp and Origin Energy, among many others. Our public sector team had a great quarter, meeting our expectations from local municipalities to universities to the larger deals in the U.S. federal government. Our unique position as the only DAP provider with FedRAMP status is paying dividends. we have seen a significant increase in demand in this segment over the last year due to the go-to-market motion driven in the channel. We now have multiple large system integrators embedding WalkMe as a value-added discriminator into their offerings and oftentimes supporting multiple SIs on the same bid or RFP, which increases our chances of successfully deploying in the government tech stack. In SLED, we continued our rapid pace of new logo acquisition by signing deals with the Ohio State University, John Hopkins University, and the City of Atlanta. In federal, we were very pleased to be awarded three new opportunities with the U.S. Army. at the Recruiting Command, at the Training Information Systems Group, and a prototype for the Enterprise Business Systems Convergence Program, or EBS-C. The EBS-C program is a consolidation of the Army's multiple ERP systems down to a single system that focuses on improving force readiness while improving overall user experience. In other words, strong use cases for WalkMe's value proposition in support of the Army's digital transformation objectives. Note that some of the federal transactions have a ramp in revenue recognition. These structures are favorable to us in the long run, but have less initial revenue recognition than we previously anticipated. In total, we're very pleased with the progress our public sector team has made over the last year, and we're optimistic on their continued growth in the fourth quarter and 2024. Our partner ecosystem is expanding and will continue to be an anchor of our commercial, enterprise, and public sector business moving forward. More net new ARR is being impacted by the ecosystem than ever before. We expect that by the end of 2023, partners will have impacted over half of our net new ARR company-wide. We onboarded another large group of global and regional partners in Q3. We're now seeing our largest global system integrator partners incorporating our solutions for driving digital adoption into their own first-party offerings. These are the signposts that our best-in-class digital adoption tool is proliferating in our ecosystem and our partners are expanding the reach of our platform. At Realize in October, we were pleased to announce the WalkMe Ecosystem Partners of the Year. Congratulations again to all the winners, and specifically to Deloitte and SAP Concur for being named WalkMe Global Partner and ISV Partner of the Year, respectively. As I look forward to the fourth quarter and into 2024, we have made tremendous progress to drive internal change in our organization and to improve execution. I am pleased with how we are positioned to close the year and start 2024. If the demand environment continues to improve, we can take advantage of the opportunity. Now, I will pass it over to Hageet.